The One Topic You’re Still Avoiding

Why we hate to talk about it

Ric Edelman: It's Friday, June 30th. Coming up on today's show, conversation with Brian Hamburger and the advice he gives to advisors. You know, this is not an election year. We all seem to be talking about politics anyway. But you know what you're not talking about. Your debt. There's a new study of 2,000 people ages 18 and older. And there's strong agreement that talking with your family about money could improve the gender wealth gap. Two out of three people say that.

But even though pretty much everybody is in agreement that talking about money can be beneficial, 62% say they never talk about money. 63% say they don't discuss it with family. 75% say they don't discuss it with friends and even 46%. Nearly half say they never talk about money, even with their spouse or partner.

In fact, one out of three say they'd rather stand in line at the DMV than have to talk about money, which is a pejorative comment both about money and the DMV. Only one third of Americans say they've talked to a financial advisor, but three fourths have bought a lottery ticket and 25% say they get advice from a fortune teller. Well, as someone who's been in the financial advisory field for nearly 40 years, I find all of this disconcerting and a little bit insulting. By the way, 28% know how much money Elon Musk is worth, but only 24% know how much they themselves are worth. 

Really? You don't know how much money you have, but you know how much money Elon Musk has, which basically is a way of saying, you know, he has a lot and you don't have any. This is really not something to have secrets involving. There is no value. There is no benefit to keeping secrets within the family. If you're the adult children, you need to talk to mom and dad because guess what happens if they run out of money, They're going to turn to you for help. And for spouses to not know how much money their spouses are earning, how much money you have in savings and investments, how much you're spending on bills to pay the lifestyle, how much money you have in debt, how much money you've accumulated in retirement accounts.

This is simply not healthy. So go ahead. Blame me. Have the conversation and simply say, “I didn't want to talk to you about this, but Ric Edelman said I had to ask.” And so I'm asking. Go ahead. Blame me. I'll take the heat.

Exclusive Interview: Brian Hamburger, CEO of Market Counsel and the Hamburger Law

Compliance Attorney for RIAs is known as “The Adviser’s Advisor”

Ric Edelman: Today I'm going to take you behind the scenes here, because normally on this show, we just talk about what's going on in the world of personal finance, investment management and the business of advice. But I really want to show you what's going on in the world of advisors with someone who is a household name within the advisory community. So I'm really happy that my friend Brian Hamburger is joining us on the program right now. Brian is president and CEO of Market Counsel and the Hamburger Law Firm. Brian, great to see you, my friend. 

Brian Hamburger: It's always good to see you. 

Ric Edelman: My friend Brian is one of the nation's top legal and compliance experts for independent financial advisors and wealth management firms. In addition to being the head of the hamburger law firm, Brian is also the founder and CEO and president of Market Counsel Consulting, which is the top business and regulatory compliance consultancy to independent advisors in the country. He's routinely named as one of the industry's most influential people. He's often called on to meet with Congress and the SEC, and Brian is a member of my faculty at DACFP, the Digital Assets Council of Financial Professionals, where he teaches one of our modules for advisors focusing, as you would imagine, on law and compliance. Brian how long have we known each other? 

Brian Hamburger: Well, you'd have a better memory than me because I think we've known each other since I was a kid. I know I only look 25 now, but I remember hearing about you when I was working at my father's investment advisory firm. I was probably 14 or 15 years old. You know, you had a reputation back then. And by the way, you still have that same reputation now, Ric. 

Ric Edelman: I'm afraid so. Yeah. 

Brian Hamburger: But you were you were kind of the anti-financial advisor. You were the guy that, like, you know, didn't go to the group events. You were you were the guy that wanted to do things differently. And I came to learn that you just refuse to be defined by how things had been done, which intrigued me. I'm very much keen on knowing the rules, but I'm also keen on questioning them at the same time. And so I think for many years you and I developed a kinship of sorts for sure. 

Ric Edelman: And I've spoken at Market Council and it's one of the top events in our industry. Hundreds and hundreds of advisors go. It's kind of like a place you got to be at if you're going to be in this industry. But it's unusual, Brian, for you to be an attorney who is focused in a legal practice aimed at financial advisors. I mean, that's a bit uncommon. How did you decide to devote your practice to the advisory field? 

Brian Hamburger: Well, I grew up from those types of internships, working for my dad who made his way to the industry by way of selling insurance and then joining an independent broker dealer and then becoming an investment advisor. And every time I would speak to him or his colleagues, they would be frustrated, but they weren't even able to really frame out the problem. They would just say, “Oh, this compliance department is preventing me from doing this.” And I knew that I didn't have the patience to be sitting at the dining room table working with people on their college savings and their investment allocation. Not to say that that's not really worthy work, but I just knew that that wasn't in me. But what I thought I could do is help amplify their efforts right and help support financial advisors in everything they wanted to do. So that this notion of independent advice didn't mean somehow getting less legal guidance or less regulatory compliance guidance than working for one of the large financial conglomerates. 

Ric Edelman: And let's elaborate on that, because I think it's a distinction that is not only incredibly important, most consumers are not really fully aware of this. When we think of financial advisors, I think most of us tend to naturally think of outfits like Merrill Lynch or Wells Fargo, these big, huge organizations with 100,000 employees and 10 or 20,000 financial advisors. And in those firms, they'll have an army of compliance officers, I mean, literally an army at JPMorgan, I think they have 40,000 people working in their compliance department. And their job is to make sure that the advisors are following all the rules that they're documenting correctly. They're serving the clients properly, that they're doing everything you need to do under the law. But aside from those big wirehouses, those big brokerage firms, there's another entire industry of independent financial advisors. These are mom and pop shops, in many cases a sole practitioner. Think of the local accountant or the local butcher or the local dry cleaner. They're just small company doing business in a local community, serving 100 or 200 clients. And they are not backed by a big bank or brokerage firm. They don't have an army of professionals to help make sure they're following the SEC's rules or FINRA's rules. They need to follow the rules, but they don't have the infrastructure to do it. And that's the kind of advisor you devote your service to. 

Brian Hamburger: Yeah, absolutely. And these folks, just because they don't have the same type of brand name, they shouldn't be forgotten. Unfortunately, most consumers know the brands that you just referenced because they're in the newspaper, often for wrongdoing lately. And that's a shame because the tens of thousands of financial advisors that work at these firms are largely really good people and excellent professionals. But you can do a thousands of things, right? It's the one thing that you do wrong that ends up in the newspaper or the publications. And so I don't think most consumers are aware of the myriad of complexity that exists within the securities industry. They just kind of feel that it's the same type of rules as any other retail business, but it's not right. The securities industry doesn't only have the SEC looking after it. Each state has its own version of the SEC looking after it. But on top of that, credentialed professionals within the space such as yourself have to answer to the credentialing authority as its own organization. And if they are a registered representative, they also have to answer to FINRA, which is a self-regulatory organization. And by the way, I'm just getting started, right? If they also sell insurance and you mentioned accountants, you it really is a tangled web that financial advisors generically have to navigate through. 

Independent advisors used to be at a disadvantage, You know, years ago you'd go to one of these brand name shops because they would have access to more securities, access to greater capabilities. And, you know, it was the old remember the commercials, like... “ When E.F. Hutton talks”... It was giving you the sense that they knew something you didn't know. Yeah, I think Internet and technology in a large role have just displaced all of that. Products are unilaterally available. If you can get a product at one of these major wire houses, you can get it with an independent advisor.

Really what's become premium over the last few decades is the notion of advice. And I think what consumers are learning when they peel back the onion is that independent advisors are able to give them a more objective advice model. And really, that's what consumers are valuing. There's no cost anymore to trade. You can buy and sell securities on your own. You can open up a Robinhood account or any other type of self-directed investment and not pay a dime for a trade. And that's no different when you work with these firms. But it's the advice that's really at a premium. And that's what independent advisors do better than anyone. 

Ric Edelman: And you've highlighted something that's really important when you say that the advisor as an independent is going to be able to serve the client in a way that an advisor at a wirehouse or a major brokerage firm can't. It is because of that independence. In other words, if you are an advisor with a major brokerage firm, you're an employee of that firm, which means you have to answer to the boss, who's predominantly concerned about the shareholders, the owners of the business. But when you are an independent advisor, you're the owner of the business. It's just there is nobody between you and your client. That's all there is. There is no shareholder. There is no management, there isn't any third party to whom we are answerable to. And that allows the advisor to focus exclusively on the client's best interests, which is not something that clients tend to enjoy when they're dealing with an insurance agent or a stockbroker at those big outfits. 

Brian Hamburger: Yeah, that's right. And most independent advisors are advisor-owned organizations.. And you talked about the best interest. That's not to be confused with the best interest standard that's been touted lately. That applies to broker dealers. The best interest standard that you're referring to is the fiduciary obligation. And so registered investment advisors have that obligation, which means that they have a legal duty to place the client's interests ahead of their own. And how great is that, to put your hands and your trust in someone who's going to be there, through thick and thin, through all your through all your children's permutations and college and weddings and all that. How great is that to have someone who has a legal obligation to place your interests ahead of theirs? There are few things that are more comfortable than that. 

Ric Edelman: And the shocking aspect of that, though, Brian, is that most people assume that their advisor will behave that way. But when you're dealing with someone at a brokerage firm or at an insurance company or at a bank, they don't have that obligation. 

Brian Hamburger: No. And you talk about how those folks work for others. It's more than that, because it means the compensation systems are crafted by others. And there may be greater incentives to sell something that is not aligned with the client's interests or not at least 100% aligned with the client's interests. We often use this term on the technology side where we say, if you're not paying for it, you're the product. And it's kind of true here as well. Where if you're not paying someone for the advice that you're getting, they're making their money somehow. And typically it's by selling you a product that isn't the best investment vehicle for you. 

Ric Edelman: And if nothing else, they're getting compensation from the sale of that product because they got to get paid. Somehow or other. 

Brian Hamburger: They're entitled to make a living. 

Ric Edelman: Now, what you're describing is an environment where we have two worlds. We have the big established traditional Wall Street machine, which has been around since 1792. And then we have the independent advisory community, which is far newer. I'm among the first gen. I helped to invent  the Independent Advisory channel and I was among the early folks adopting this. Back when I got started in the 1980s, there were only a handful of us. It was very rare to come upon somebody who was operating their own business as an independent advisor, as a fiduciary, serving their clients best interests. Today, there are 300,000 RIAs in the country. Has it surprised you at how big the independent advisory field has gotten? 

Brian Hamburger: I marvel in it. I really do. Without checking myself, I still think of it as that cottage industry. And I'm reminded of that when I speak to people outside this industry that it's still relatively small and unknown compared to some of these big brands that are just throwing marketing dollars around. It's maturing but I think we're I really think we're still in the early innings when it comes to independent advisors. They're just starting to attract outside investment, and there pros and cons, when it comes to outside investment. But it's really becoming a bona fide contender when it comes to options within the securities industry. And it's not the advice that has changed. It's that these independent advisors are all using those major firms as custodians for the assets. So the assets are protected by huge global organizations that have all the checks and balances, but they've bifurcated the advice and that's what's being provided by these by these independent firms. It's a model that no captive employer can stop. We've learned here in America, we talk about 1792, we've learned that there's really no force that can stop this notion of freedom and independence. And when an advisor finally realizes how to remove those shackles of servitude from their employer and how to redirect their primary obligations to their clients, I honestly believe Ric there's nothing that can stop them. 

Ric Edelman: We have a name for them. We do. We call them breakaway brokers. These are advisors who leave the big institutions and go open their own shop when they realize they can make more money. They cut out the middleman and the infrastructure and the overhead of the big firm. They get rid of the, as you said, the shackles of being told what to do, how to do it, who to do it for, and they can just focus on serving their client the way that they know the client needs to be served. So you said a moment ago that you think that this independent industry is only going to get bigger and better. It's only just getting started. What makes you say that? Why do you think it's going to keep on growing? 

Brian Hamburger: Well, I think that most of the people who remain at these large organizations are there for the wrong reasons. They're there out of fear. We saw that following the pandemic, because I would hear from people to say, “Hey, I would love to go independent, but my clients love coming downtown to my big office and they love the plush settings and the building that they come into.” And then suddenly in the pandemic, when they couldn't meet with their clients or clients couldn't come down there, they found that their clients still were drawn to them, still had an affinity to them. It had nothing to do with the plush settings and the administrative assistant who goes and fetches them and brings them to the meeting room. None of that is why the clients have such loyalty towards their advisor. And so they started to realize that. They started to realize that they don't need all the material trappings and they start to ask these questions about, well, I'm told that I can only do this at my firm. How would I do this elsewhere? And so we start to go through a discovery process and it's just the tip of the iceberg. We've only seen relatively small number of folks move on to be breakaway brokers, but it's happening in increments. Remember the whole independent broker dealer movement, which was, kind of on the way towards full independence where people would become agents for brokerage firms that weren't wirehouses. They weren't creating their own proprietary product. They weren't necessarily doing investment banking, but they were still broker dealers. You know, now people are realizing that they don't necessarily need that in many situations. I just don't think you can stop the force. 

Ric Edelman: But there are issues that advisors face in going independent or being an independent advisor. And I have a feeling, a little more than a feeling because of my experience with all these advisors. There are issues they don't even know about that can get them into trouble. That's true. Talk about some of those. 

Brian Hamburger: It's surprising for advisors who so often focus on the quality of their advice how they don't necessarily look for those qualities in the advice that they're receiving. When I say that, I think of countless advisors who have decided to move from their employment to their own firm without seeking the advice of independent counsel. And there'll be a misstep along the way. And we'll get that call. We'll get the call saying, “I know I should have called you, but trying to save some money or I didn't think I needed to.”

And the advice that they're going on is akin to a client walking in and saying, “Hey, I constructed this portfolio. And as the advisor say, “What was the basis for that?”  “Well, this is what my buddy did, right? This is what my friend did. He seems really smart...”

Every scenario is different. We just had a major team, billions of assets under management, that is looking to leave a well-known firm. And they constructed this entire transition plan. And right before they pulled the trigger, someone raised their hand and said, “Hey, have we even looked at X, Y and Z?”

And the answer was no. And so if you think about it, some of these advisors are taking decades of their career, right? All the goodwill that they've developed with building up their clientele and compromising it, sacrificing it because they're used to being the smartest person in the room. And let's face it, advisors don't make for great clients. I love them. They're all of my clients. But they're a little challenged in that they have a hard time asking for help to achieve their objectives. 

Ric Edelman: Well, I'll tell you, as an advisor, I know why advisors are lousy clients of lawyers, because you're in my way. I want to serve my client. I want to find a client. I want to get a client. I want to get more assets from the client and manage those assets. And I want to do my job. And you're making me fill out paperwork. You're preventing me from saying things that I might want to say. You're forcing me to document. And that takes a lot of time and it distracts me from the time I want to spend with my client. In other words, Brian, you're a pain in the butt. 

Brian Hamburger: You're right about that. You're absolutely not the first person to tell me that. Ric, you have to understand, go back to what we talked about earlier. You can do a thousand things, right? And unfortunately, the world today will judge you on that one major misstep. And so our job is to ensure that you can harness all of that success and not find yourself redirecting your time towards a problem. 

Ric Edelman: So you said advisors are really terrible clients and you're saying that with love in your heart, I know. But why then do you want to serve them? What makes you want to put up with the annoying clients? 

Brian Hamburger: They're lousy clients when they start with us because they have a hard time articulating the ask. They're good at directing because that's what they do, right? They're used to being in their space, the smartest person in the room, and they have to exude confidence. And so it's hard to strip them from that and say... listen, it's okay...this is a safe place. Talk to me about your vulnerabilities. Talk to me about your concerns. But let's really talk about what you're trying to accomplish so that I can help you accomplish that. Once we get there, then they make for amazing clients because they're incredibly grateful and they really understand the value of objective advice intuitively. It's just hard for them to get into that mode at first. 

Ric Edelman: So are most of them coming to you before they have gone independent or after? 

Brian Hamburger: Almost all of them come to us before they make the move to independence. And so we'll work with them on all of the complexities associated with the breakaway broker process moving to independence and in general, big buckets. That includes their employment transition. So formulating a plan for them to go from where they are to independence, because I think most consumers don't realize this, but their advisor typically has a lot of legal restrictions. If their advisor isn't calling them when they make the move, it's because they're legally restrained from doing so. Everything has to be well orchestrated in order to ensure that we don't have a misstep and we don't have in the securities industry, we have a lot of employment transitions that end up with a temporary restraining order or some type of restraints where the advisor is stuck and they can't do much.

The other big bucket is a business startup. Helping any other business in America; helping them start up a new business and the type of business it is and where it's situated, who's going to own the business and all the governance documents.

And then the third area is the regulatory area. So helping them with not only registration but drafting all of those lovely disclosure documents that everyone loves to read, drafting all of the client agreements, drafting all the policies and procedures for the firm, and helping install that initial regulatory compliance framework so that the firm has a good understanding of how to operate, not only how to operate their business, but how to operate as good stewards within the securities industry. 

Ric Edelman: So within all of that, any lessons learned come to mind? 

Brian Hamburger: I got a lot of lessons learned. But, you know, most of my lessons that I learned are as a business owner because at the end of the day, I am similarly situated to my clients where I started this business. I started Market Counsel and the Hamburger Law Firm 22 years ago. And that's the role that I'm primarily involved in. And yeah, I learned a lot for sure. Wish I could rewind and maybe put those lessons into practice earlier. But, I learned primarily that, showing up and putting forth effort each and every day, consistent effort beats the extraordinary one every day of the week. That seldom amazing spurt that you get from some employees doesn't] give your colleagues the trust and confidence that you're going to be there and you're going to be delivering for them consistently. I learned that failure is a byproduct of success and not to be so hard on myself. I tell my kids that I fail each day. Just depends upon what time before I get my first failure. 

And I use a lot of sports references in business, but the reality is, there's really not a clock. There's not a shot clock that's running. So that failure, as long as that's kind of a step along the way, you as a business owner define when the game is done. And so I tend to be stubborn. I tend to just continue to go at it until there is an end result and eventually come out on top. And I guess the other thing that I would think of is the business process and continuous improvement into everything that we do. It is core to who we are. And so every time we finish a project, every time that we close a dispute, we're always getting together and saying, what could we have done better? How can we improve upon this? What is what was the client experience here? How can that, be better? And just asking a series of questions, that continually allows us to chase that standard of perfection, the elusive standard. 

Ric Edelman: And what you're describing really are traits of a successful entrepreneur, not merely an attorney. And to your entrepreneurship, most lawyers are frankly content at being lawyers. That's why they got into law. But that wasn't enough for you, Brian. You created the Market Council Summit. It's, as I mentioned, one of the top conferences in the industry. Explain for folks who are not familiar what the Market Council Summit is, and why did you create it? 

Brian Hamburger: I started out as a compliance workshop, so it had far more humble beginnings, right? We started as a compliance workshop, located a couple miles from our office. It was 35 people in the first year and very logical extension of the regulatory compliance work we were doing. But the next year we expanded the capabilities to cover all the different areas in which we practice. And what we realized is that we were not getting the compliance folks, but rather the CEOs of these independent advisors. Our attendance doubled the year after. And it's gotten to the point that people call it like the ‘Davos of wealth management’. People have called it the conglomerate of industry CEOs. And really, it is a meeting place. It's a community of CEOs of independent wealth management firms located throughout the United States. And they're coming together to have a common conversation. They're coming together in a neutral ground because we're not beholden to any one large organization, and they're really coming together to debate one another and to engage in dialog, which just isn't done that much anymore.

It's become a real community and it's become a symbiotic component of the work that we do. So we have this conference and we bring together all of these top wealth management firms from across the industry and the heads of these wealth management firms. And lo and behold, these are many firms that we render legal advice to throughout the year, and they're firms that we help run their regulatory compliance programs throughout the year and consult with them on business issues. And so it really is just the icing on the cake and it gives us an opportunity to go from these Zoom calls to actually shaking hands in person and even giving hugs every now and then. 

Ric Edelman: It's a lot of fun. The event is very impactful in the industry for sure. So given these two, they're very different putting together a major conference versus operating a law practice. So what does a typical day look like for you? 

Brian Hamburger: I don't think they're that different at all. I think that people characterize what I do and they just think, well, what you do, you must do what other lawyers do. And I promise you, my day looks nothing like any other lawyer. It's far more creative than people would ever think. And I love that I go from design to solving complex problems to advocacy to utilizing our network and connections to help influence outcomes, to serving as like our tech maven within the company. All within an hour. I mean, just kind of swing from Vine to Vine. Maybe at some point, someone will classify me with attention deficit disorder. But until then, I like to just call it curiosity. I like to be involved in a lot of things. I get bored with the mundane. I'm obsessed with business strategy. I'm obsessed with the client experience and business process and standards and really good design. And it's probably a huge strain on my productivity because I don't focus on any one thing for all that long. 

Ric Edelman: I know what you're saying. I've often been accused in my company of sharing the idea of the day club. Yeah. So I've always said as the CEO, I have the best job in the world because I get to create the problems. I make everybody else solve them. 

Brian Hamburger: It's a very accurate description. I'm going to use it. 

Ric Edelman: So does your family even know what you do for a living? 

Brian Hamburger: My kids do, because they each have worked here, so they have a really keen idea as to what I do. Beyond that, I got a great conversation starter. When they want to know what I do, I say, well, I do regulatory compliance for wealth management firms and that is the end of the conversation. That's it. I don't talk about being a lawyer because I know I'm going to get the questions about some legal advice. I don't talk about running a conference. I don't talk about anything else that I do. I just use that and it just kills all conversations. Actually, it kills all conversations except once.

And I'll tell you this quick story. I was headed back on a red eye the night before we opened our conference. And like I often do; I'm writing my speech on the flight there. And so I sit in my upgraded seat in first class and I'm sitting next to Sinbad. And he wants to engage in conversation, and I don't. And so he asked me a few polite questions and I kind of give him the short answers. And then he says to me, So what do you do? And I figured, I'm going to use that same line and it's going to kill this conversation. And I tell him, I said “I do regulatory compliance work for wealth management firms.” And he turns to me full on and he says, “Fascinating. Tell me all about that.” And so for the next hour, he really did have a bona fide interest in investing in securities and made me read through my speech and gave me some gave me some tips on timing. And it was definitely an unexpected plane ride. 

Ric Edelman: That's awesome. And I think that's a testament to his creativity and why he's so successful. So let's make this tactical and practical for our audience. We have both financial advisors listening to this show as well as investors and consumers. So give us a piece of advice for each one of them. We'll start with the advisor. What do you recommend for the advisors? 

Brian Hamburger: For 22 years we've had a tagline at Market Counsel called The Adviser’s Advisor.  I think every advisor deserves their own advisor and not necessarily only for legal advice. I think they should also have their own financial advisor. I think they should also have their own health or medical advisor. I think that as smart as advisors are, they can't discount the benefit of having an objective party look at them and tell them sometimes things that they don't want to hear. Maybe it's things that they should hear and will help them overcome some of their hesitations. But I think every advisor needs to go out and get their own advisor.

From a consumer perspective, I think they should recognize that the financial markets, security markets, securities markets are very, very complex, but they should not be intimidated by that complexity. Maybe a little hesitant. They should read all of the incredibly boring stuff me and my and other lawyers write because those words have meaning. Those words describe relationships and describe expectations. And they themselves should have some degree of objective advice at their disposal, whether it's a holistic and comprehensive financial planner or wealth management firm or investment advisor. They don't have to go out and get everything, but they should have a sounding board. And I'm not talking about a message board necessarily. I'm talking about a professional that they can call upon and get sound objective advice because it's going to allow them to sleep at night. It's easy to just hit ‘buy’ on an investment, but when you start to add up all those dollars and cents and the efforts and work that went into all of them, people just ought to pause for a moment and say, is this something I really want to do? 

Ric Edelman: That's Brian Hamburger, the president and CEO of Market Counsel and the Hamburger Law Firm. And if you'd like to learn more about Brian, you're a financial advisor. You can reach him at market counsel.com. And we've got that link in our show notes today. Brian, thanks so much for joining us. 

Brian Hamburger: Thanks for having me, my friend. 

Ric Edelman: You know, I'm not sure how you're enjoying this podcast. Some people listen to it, some people read it and you can get the transcript at the website. But the Friday edition of this podcast every week is also a videocast, and you can not only listen or read this podcast, you can watch it too. Just visit TheTruthAYF.com. 

Ric Edelman: Hey, if you like what you're hearing, be sure to follow and subscribe to this show wherever you get your podcasts. Apple , Google, Spotify, YouTube. Follow and subscribe on your favorite podcast app. Have a great Independence Day Holiday weekend. We're taking Monday and Tuesday off. See you Wednesday.

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